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Tax is common factor in common people life. It is what help government keep working. Taxation management is one of professional course in management. This exam paper for Taxation includes: Taxation, Exam, Tax, Taxable, Income, Liability, Apportionment, Expenditures, Sales, Goods, Services, Contracts, Depriciation, Leased, Assets
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Q.1 Mr. Manto worked as an employee in Berlin Hotel, Germany for a period of five years. During the said period he did not visit Pakistan for a single day. He returned to Pakistan on July 1, 2008 and immediately joined as a General Manager in a well-reputed hotel, based in Karachi.
Assume that the details of his income for the tax year 2009 are as follows:
(i) Basic salary (per month) Rs. 100, House rent allowance (per month) Rs. 30, Medical allowance (per month) Rs. 10,
(ii) Besides medical allowance, he is also entitled to free medical treatment at approved hospitals. (iii) He has been provided a company maintained 1600cc car which was used partly for official and partly for personal purposes. The hotel has leased the car from a bank. The gross lease rentals payable over the period of lease amount to Rs. 2,700,000. The fair market value of the car at the time of lease was Rs. 1,600,000. The total lease rentals paid by the hotel during the year amounted to Rs. 800,000. (iv) He is entitled to lunch at the hotel’s restaurants where the usual charges are Rs. 400 per person. He is entitled to concessional rate of Rs. 40 per day which is deducted from his salary. Assume that there are 300 working days in the year. (v) He went for a training course to Islamabad where boarding and lodging cost amounting to Rs. 150,000 was borne by the hotel. He incurred a further expense of Rs. 125, which was reimbursed by the hotel. (vi) Provident fund was deducted @10% of his basic salary. An equal amount was contributed by the hotel. Interest credited to his provident fund account amounted to Rs. 48,000. (vii) As per terms of employment agreed with Mr. Manto, tax payable on salary will be borne by the hotel. (viii) During the year, he also received an amount of Rs. 94,000 (net of withholding tax) from a local university where he gave lectures on hotel management. (ix) On July 15, 2008, he received a lump sum amount of Rs. 4,000,000 through a normal banking channel as final settlement from Berlin Hotel. (x) On August 1, 2008, he inherited 25,000 shares of a private limited company. The estimated fair market value of the shares, on the date of inheritance, was Rs. 42 per share. He sold all the shares on February 28, 2009 at Rs. 62 per share. (xi) He paid zakat amounting to Rs. 200,000 to an approved organization, through cross cheque.
Required: (a) Compute Mr. Manto’s taxable income and tax payable for the tax year 2009. (b) Briefly explain the treatment of items which are not considered in the above computation. (18)
Applicable tax rates are as follows: Where taxable income exceeds Rs. 1,200,000 but does not Rs. 1,500,000 12.5% Where taxable income exceeds Rs. 1,500,000 but does not Rs. 1,700,000 14.0% Where taxable income exceeds Rs. 1,700,000 but does not Rs. 2,000,000 15.0% Where taxable income exceeds Rs. 2,000,000 but does not Rs. 3,150,000 16.0%
Q.2 (a) Hijazi Limited is a multinational unquoted company. Presently, the company closes its financial year on June 30. The company is now considering to change its income year from June 30 to March 31.
Required: Mr. Safi is the tax consultant of the Company. Write a memorandum on his behalf, explaining the following:
(i) Requirements of the Income Tax Ordinance, 2001 regarding change in tax year from normal to special. (ii) The tax year corresponding to the income year ended on March 31, 2009 and the due date for filing the return of income. (^) (09)
(b) Briefly discuss the residential status of the following persons under the Income Tax Ordinance, 2001 for the tax year 2009: (i) Asif is an employee of Balochistan Government, who has been sent to United Kingdom for an official assignment on December 1, 2007 for two years. (ii) Messrs. Akhtar Abbas & Co. is a partnership firm, doing business of financial consultancy in Pakistan as well as United Arab Emirates (UAE). The management and control of its affairs is situated partly in UAE and partly in Pakistan. (04)
Q.3 (a) Advance tax collected by the Collector of Customs is considered as final tax on the income of the importer arising from imports except in certain situations. You are required to list such exceptions. (04)
(b) Mr. Qasmi is in the business of manufacturing of leather products. The financial results of the business for the tax year 2009 are as follows:
Rupees Sales 12,000, Cost of sales 10,000, Gross profit 2,000, Selling, administrative and other expenses 2,500, Net loss (500,000)
He had rented out the ground floor of his house and received Rs. 300,000 as rent thereof. No tax was deducted by his tenant. Advance tax paid during the year includes the following:
Rupees Import of raw materials 200, Electricity bills 70, Telephone bills 50,
Required: Compute the tax payable/refundable by Mr. Qasmi for the tax year 2009. (05)
Q.4 (a) Mr. Bukhari is a resident person and owns a property abroad. During the year, he received rent amounting to Rs. 3 million from that property. The tax on rental income has been duly paid abroad and there is no tax treaty between Pakistan and the country in which the property is situated.
Explain the tax treatment of rental income received by Mr. Bukhari in Pakistan. (^) (03)